The Investment Choice of Soft Drinks Industry by Valuation of Companies

Abstract

Recently, more and more investors enter the market with increasing investment demand, but due to the diversity of the market and investors are not familiar with the market, so many failed investments. This paper will focus on the soft drink industry and evaluate three companies in the soft drink industry: Coca-Cola, Pepsi and Monster Beverage to select the most suitable companies for investors. All three companies are showing solid growth and this trend is expected to continue. This article focuses on the stock, profitability and capital structure of three companies, Coca-Cola, PepsiCo and Monster Beverage. First, from the stock side, through the comparison of Earnings per share and Price Per Earnings over five years, Coca-Cola has the most EPS growth, which means it is the most promising company, and Coca-Cola has the lowest PE value, the lower PE value means it has a higher stock price. So in terms of these two figures, Coca-Cola is the most suitable investment. Secondly, in terms of profitability, this paper starts with six financial data: revenue, net income, gross profit margin, EBIT margin, net profit margin and ROE. Although PepsiCo has high total revenue, net income is similar to Coca-Cola Company. On the contrary, Monster Beverage Company has a high net income to revenue ratio, although it is only medium-sized. Finally, from the capital structure perspective, this paper uses the discounted cash flow method to estimate the value of the three companies. Coca-Cola's equity value is the highest among the three companies, so it is the most suitable for investment. Therefore, it is concluded that Coca-Cola is the most suitable investment among the three companies at present.